In 2021, despite the disruption of the pandemic, full-year investment volumes in CEE, totalling €11.07 billion, were up by 6% year-on-year but ca. 20% lower than the same period of 2019. Colliers originally estimated that year-end volumes for 2022 could reach in excess of €12.0 billion, however, the war in Ukraine and ongoing pressures on global economics could impact this outlook, says Colliers in its CEE Investment Scene | 2021 - 2022 report.
Investment activity still below pre-pandemic levels in most countries
Individually, most countries are behind their pre-pandemic volumes, but Poland, with 57% of 2021 volumes, has reached its 5-year, pre-pandemic average. There was certainly a pick-up in activity in the final quarter of the year, but many markets were still held back by a lack of available product.
Prime yields see limited movements
Colliers recorded limited movements in prime yields for many markets in the region, primarily due to the ongoing lack of transactional evidence to support further shifts. The exception, however, is prime logistics yields that have come in by almost 100 bps on average across CEE since Q1 2020, with Poland reaching over 180 bps. The company’s view remains that some markets will see further inward shifts although the pandemic and the impact of the war in Ukraine is driving inflationary pressures and negative economic sentiment. In 2022, we will therefore see how central banks will manage these pressures, which may be positive in terms of indexed rents but, will at some point eventually be reflected in the cost of debt.
Industrial attracts the most amount of investment
For the first time since 2008, the industrial sector secured the top spot with a 38% share of 2021 volumes. Offices and residential continue to record stable volumes, despite a relative shortage of available product for sale on the market. Retail volumes continue to be supported by the retail park and supermarket assets, while hospitality volumes remain limited overall.
CEE capital continues to be strong
Western and Northern European funds were behind 36% of all transaction volumes in 2021, most notably capital from Germany, the UK, Austria and Sweden. CEE capital was also very strong with a 32% share of total volumes. Czech domiciled capital was the most active overall with an 18% share overall and responsible for 52% of Czech volumes, 68% of Slovak volumes and acquisitions also recorded in Poland, Romania, Hungary and Bulgaria. Hungarian capital also remained active, with a 42% share of its domestic market acquisitions in both Romania and Poland.
The economic situation remains complex
With the geopolitical and health-related crises, the global economic outlook continues to change frequently and is extremely difficult to predict. The current situation is highly complex, impacts on a broad spectrum of the economy and is most likely to worsen throughout 2022 before getting any better. The war and related sanctions, on top of pandemic and ESG drivers and disruptions, will impact property markets in terms of supply, demand and affordability. Not all these impacts are negative but, will differ between property sectors. However, it is both rising inflation and interest rates that are being very carefully monitored as they will bring an end to the long-running ‘low for longer’ period which will not only impact the cost of debt and pricing, but also multiple other costs for real estate investors, developers, occupiers and consumers alike.
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